GS soap opera

As GS soap opera plays out, here is what I think.

Greg Smith's "Why I Am Leaving Goldman Sachs" parallels Mark Zuckerberg's blog post after Jessica Alona  broke up with him. Mark called her "bitch" in his blog. Glaring lack of Grace.

The guy worked at GS for almost 12 years and took full monetary advantage of GS's culture. Since he doesn't return his bonuses, he is as obnoxious as the rest of GS managers he describes.

Now, what about Wall street at large? 

Part of the financial crisis of 2007-2008 was due to the rating agencies rating risky bonds as AAA bonds pursuing profits and competing with each other for the clients-bond issuers. They, in effect, were taking advantage of the pension funds buying these bonds based on the AAA rating. I asked the head of the research of one of the rating agency about that. He answered that those who buy the bonds have to do their own research. Sounds similar to the Blankfein's response to why GS was selling to its clients the tools which were not appropriate for them. Blankfein said that the clients buy  instruments  with the predefined risk profile to play certain role in their portfolio and that's, in the end, client's decision which instruments to buy.

The broader part of the financial landscape is institutional wealth management based on the model portfolios. The clients are duped to believe that there is scientific prove behind the models. They are not told that the investment theory cannot be proven experimentally, and, therefore, it's not a scientific theory. The wealth management is a huge industry swallowing one third of the client's money over the thirty-forty years of the client's portfolio management.

How exactly is GS different? The level of cynicism?

Roger McNamee talks to Bloomberg West

Roger McNamee is  very refreshing in his critique and guidance. He allocates Elevation Partners VC capital to eight slots and doesn't want to diversify. Diversification minimizes the profits and increases the risk. Apple is the only public stock he ever owned.

He looks for the next enabling technology. Not like Pinterest collecting people's crap. But, like Adobe in the past, now - enabling mobile applications to run.

 Listen up, new entrepreneurs.

Andy Kessler on the third wave of computing

The clip starts with the two-bedroom house in Menlo Park and close proximity to the Facebook campus, the only property going below one million. Just slightly below. Facebook going public will create a few billionaires and about three thousand millionaires.





http://andykessler.com/
CNBC clip from February 07, 2012 talking about Facebook

The world's 100 richest hedge funds in 2010

Here is the link to the Bloomberg report on the top performing hedge funds in 2010 published in February 2011:

http://www.opalesque.com/files/bloombergtophedgefunds.pdf 

We are lucky Jeff Gundlach didn't open his own hedge fund and we can still invest in DoubleLine DBLTX.

The report mentions Gundlach on page 43:

--Three of the top 10 funds made money on mortgage bonds, according to Bloomberg data. The mortgage market is often lucrative for hedge funds because it’s volatile, says Jeffrey Gundlach, chief executive at Doubleline Capital LP, a Los Angeles manager of mutual funds that trade mortgages. “The mortgage market has every single risk,” Gundlach says. People default, banks foreclose on housing loans and the government often changes the rules. “Any market that has risks morphs into opportunity,” he says.--

This was first-ever ranking of the top 100 large hedge funds. Look at the strategy of each ot the top performing funds. Mortgages, gold,  emerging markets and global economic trends stand out. You can pass this link to your friends who were hypnotized to believe that equity value investing is the only way of successful investing and all the global macro funds go bust. Although, why would I care...

The power of Global Macro. Stock picker lesson learned: watch the credit markets

James Kee, president and chief economist at South Texas Money Management Ltd., says investors should avoid short-term forecasts and focus on the longer-term relationships among asset classes. Kee talked with Bloomberg's Pimm Fox and Courtney Donohoe on Bloomberg Radio's "Taking Stock."
Audio Link (Source: Bloomberg, March 7, 2012)

I noticed two things: 

Talking about long term. Larry Summers' joke is that when people start talking about long term, they want to avoid responsibility.

James Kee's lesson learned. In 2007, bond guys warned James about credit crisis, but he had a dogmatic view relying on company data. Healthy balance sheet, P/E at the level of 1998 were important. He disregarded bearish bond guys. Since then, he watches the credit markets.